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2000-08-10 SRA-002
Shadow Strategic Rail Authority

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New Chiltern agreement brings £370 million investment


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Shadow Strategic Rail Authority

New Chiltern agreement brings £370 million investment
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2000-08-10 SSRA secures £600 million new investment for Chiltern and Midland Main Line Franchises (sSRA Shadow Strategic Rail Authority)

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date
10 August 2000
source Shadow Strategic Rail Authority
type Press release



The Shadow Strategic Rail Authority (sSRA) has signed heads of terms with M40 Trains Ltd as the preferred operator for a new Chiltern Railways franchise, under which a capital investment programme involving Railtrack plc and M40 Trains, a subsidiary of John Laing plc, is planned to bring up to £370million worth of investment and major benefits to passengers.

M40 Trains own the Chiltern Railway Co Ltd, which currently operates passenger train services throughout the M40 corridor between Birmingham and London, and Aylesbury and London. The current seven year franchise
would expire in July 2003: the new franchise will be for 20 years, with provision for shortening the term if certain projects are not implemented. Proposals were invited in December 1999 for this franchise, and three parties
submitted proposals - M40 Trains, The Go-Ahead Group plc and Arriva plc. In March 2000, it was announced that Go-Ahead and M40 Trains had been shortlisted for negotiations on the replacement franchise.

The sSRA has now signed heads of terms with M40 Trains, opening the way to definitive, contractual negotiations. In the absence of final agreement on those contracts, the existing franchise would continue.

Early Benefits
The heads of terms envisage a set of agreements later this year which will
provide users of the Chiltern network with the following benefits to be
achieved within the first four years:
Additional capacity by investing in two additional platforms at
Marylebone by October 2003, and in extra tracks (using existing
railway land) between South and West Ruislip, at Beaconsfield and
between Bicester and Aynho Junction by October 2002.
50% more train miles overall on the Chiltern network, including
doubling the frequency of service between London Marylebone and
Birmingham Snow Hill from the current hourly level to half-hourly from
October 2002.
Off-peak frequency between Marylebone and High Wycombe will
increase from four to six trains per hour.
London to Birmingham trains will be extended to Stourbridge (by 2001)
and Kidderminster (by 2002).
Journey time reductions of 12 minutes between London and
Birmingham by 2003.
Reopening the terminus at Moor Street, Birmingham to provide extra
capacity.
More capacity through additional signalling between Banbury and
Leamington Spa, a route of growing future importance for freight as
well as passengers.
Improvements in operational performance - M40 Trains to commit to
meeting the sSRA's objective of 15 out of 16 trains running on time
from April 2004, underpinned with a doubling of the incentive payment
and penalty regime.
Passengers' Charter - The 'trigger' at which season ticket holders are
compensated for poor reliability is to be raised to 99% a t the start of the
new franchise (98% at present). The trigger at which passengers are
compensated for poor punctuality is to be 92% from April 2004
(compared to 90% at present).
By 2004, all Chiltern trains to be new or completely refurbished. New
rolling stock will be leased to meet growth in demand.
Station improvements - M40 Trains is to invest £27million in station
improvements and transport integration including additional car
parking, and security during the first five years of the franchise.
Accessibility for disabled passengers is to be improved significantly,
with level access being provided at all stations managed by Chiltern.
M40 Trains is to invest up to an additional £28million in station
improvements over the remainder of the franchise, depending on the
final term of the franchise.
The investment plans for the first five years are estimated to cost £343million,
of which £150million is to be invested by or in association with Railtrack;
£153million is to be for the purchase of new rolling stock to be leased to M40
Trains; and £40million is to be funded by other investors including the John
Laing Group.

Long Term Benefits
M40 Trains has undertaken to present plans to the SRA for infrastructure
improvements between Marylebone and Aylesbury via Amersham for review
no later than December 2003. Negotiations will be required with London
Underground to secure the upgrading of this route, involving considerable
investment of over £80 million including additional rolling stock.
The franchise may be as long as 20 years depending on the outcome of a
review by the SRA in 2005, of the progress made by M40 Trains, on a list of
further enhancements to the franchise network. On the list are:
An interchange station at West Hampstead.
New services over the route between Aylesbury/Oxford and
Bletchley/Milton Keynes (closed in the 1960s).
A new route serving an M40 Parkway station and Oxford.
Examination of an extension north of Aylesbury, to a new Parkway
station for the M1 and M6.
Extra tracks between Tyseley and Dorridge on the approach to
Birmingham via Solihull.

Safety
The proposal includes funding for train protection systems, the details of
which are to be determined following recommendations from the Cullen
inquiry.

Chief Executive of the sSRA and Franchising Director, Mike Grant, said:
"I am delighted to be able to announce a deal containing significant passenger
benefits for what is the first franchise to be announced in our replacement
programme. The decision to select M40 Trains as the preferred operator
followed a tough competitive process involving two strong sets of proposals,
but we are confident we have made the right decision. In particular, we were
pleased with the willingness of M40 Trains to bear a greater burden of risk as
far as the planned investment is concerned. Our evaluation also included its
record as an existing franchisee and its commitment to further improvement.
We consulted regularly with Centro (the West Midlands PTE), concerning
services into and from that area.
"There has been significant passenger growth of around 15% per annum on
Chiltern since the start of the current franchise in 1996. By selecting a
preferred operator now we can proceed to put the mechanisms in place for
the increases in capacity required on the route over the next 10-20 years. We
have taken into account the willingness of M40 Trains to invest and the length
of franchise will enable the franchisee to earn an appropriate return."
Chairman of the sSRA, Sir Alastair Morton, said,
"We have fulfilled our commitment to agree heads of terms on the first
replacement franchise by Summer 2000. The replacement programme is on
target for completion next year, three years before the 18 short-term
franchises would have expired. The way opens for substantial investment in
this growth segment of Britain's railways."
Note to Editors
Final subsidies/premia have not been set at this stage. Details will be
announced at the time of awarding the franchise.
Important Notice
This news release is issued by the Franchising Director and its contents have
been approved for the purposes of section 57 of the Financial Services Act
1986 by KPMG Corporate Finance.
KPMG Corporate Finance is a division of KPMG which is authorised to carry
on investment business by the Institute of Chartered Accountants in England
and Wales. This news release has been prepared for general information
purposes only and is not intended to form the basis of any investment
decision or constitute an offer or invitation to bid for any passenger rail
franchise or to acquire shares in a train operating company. Neither this news
release nor any copy of it should be taken into or distributed in Canada,
France, Japan or the United States except in accordance with an applicable
exemption. The distribution of this news release in other jurisdictions may be
restricted by law and therefore persons into whose possession this news
release comes should inform themselves about and observe any such
restrictions.
KPMG Corporate Finance is acting for the Franchising Director and will not
regard any other person as its client in relation to passenger railway
franchising or be responsible to anyone other than the Franchising Director for
providing the protections afforded to clients of KPMG Corporate Finance nor
for advising any other person on the contents of this news release or any
matter referred to in it.


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